LANSING, Mich. (AP) – Michigan must make drastic changes to its Medicaid system before it is overwhelmed by rising health care costs, according to participants in a summit yesterday sponsored by Democratic Gov.-elect Jennifer Granholm.

Around 500 people attended the forum at Lansing Community College. During the gubernatorial campaign, Granholm had promised that fixing Medicaid would be among her top priorities. She takes office Jan. 1.

Medicaid provides health care to more than 1.2 million low-income people in the state, many of whom are elderly or disabled. The state expects to spend 25 percent of its $9 billion general fund on Medicaid in the 2002-2003 fiscal year.

If there are no changes to the program, the state will be spending 32 percent of its general fund on Medicaid by 2004 and 37 percent by 2007, said Paul Reinhart, director of health and human services in the state Department of Management and Budget.

“In the state budget, that giant sucking sound you hear is Medicaid,” Granholm said.

The problem is one all states are facing. In the past fiscal year, Medicaid costs rose an average of 12.8 percent nationwide, while general fund budget spending rose about 2 percent, according to Vernon Smith of Health Management Associates, a consulting firm with offices in Lansing and Farmington Hills.

In the current fiscal year, Medicaid costs nationwide are expected to go up another 6.8 percent, but states have only appropriated an average increase of 4.8 percent, Smith said.

There are several factors leading to the increase in costs. In Michigan, more people have enrolled in Medicaid as the economy has worsened, from just over 1 million in 2000 to 1.24 million in 2002.

“Every month for the last six months, Michigan has set a record for enrollment,” Reinhart said.

Because of rule changes, Michigan will be getting less from the federal government for Medicaid in the coming year. The state also has nearly depleted a trust fund established in 2000 to help pay Medicaid costs.

Michigan and other states also have been hurt by the rising cost of prescription drugs. According to Health Management Associates, prescription costs nationwide are growing by double-digit percentages each year, including a 14.5 percent average increase in 2000 and a 13.8 percent increase in 2001.

During her campaign, Granholm said she would support multi-state compacts to buy drugs in bulk and lower their cost. She didn’t mention that idea yesterday, but said she is committed to making Medicaid a high-quality system that focuses on preventive care and minimizes bureaucracy.

Granholm invited participants to give her ideas for improving Medicaid on a new website. Granholm said the comments will be considered as she drafts a Medicaid plan to be released later in January.

“I am not interested in a conference that doesn’t produce results,” she said. “I want to fix it.”

Some states are limiting enrollment to cut down on Medicaid costs, something Granholm said she wouldn’t want to do. Michigan has tried to cut costs by instituting a preferred prescription drug list that requires drug companies to give discounts. Drug companies have sued over that measure.

“Michigan has been at the forefront of Medicaid reform. Let us continue that,” Granholm said.

Michigan State Medical Society president Dr. Dorothy Kahkonen, an endocrinologist at Henry Ford Hospital in Detroit, said Granholm’s approach is innovative.

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